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Steady State, Local Growth Forecast

Expert says a change in governor could boost investment and hiring. A panel sees Ventura County outshining other regions.

September 12, 2003|Gregory W. Griggs | Times Staff Writer

Whether or not voters choose a new governor next month, California's slow economic recovery should continue through the end of the year, a panel of economists and local real estate specialists predicted Thursday.

With home values climbing, retail sales improving and automobile sales steady, the panel predicted the southern half of California -- especially Ventura County -- would continue to outshine other regions of the Golden State.

Economist Mark Schniepp, who specializes in tracking Ventura County, updated his 2003 forecast for real estate and the local economy by saying most businesses will keep a close eye on Sacramento at least until after the Oct. 7 election.

If voters recall Gov. Gray Davis, a fresh face "could bolster business and consumer spending in the state," said Schniepp, director of the California Economic Forecast in Santa Barbara. "Whether that is warranted does not matter. A confidence boost may produce greater investment ... and even some hiring."

After a potential new governor's honeymoon period, the task of solving the state's budget crisis would be daunting, said Brad Williams, senior economist with the state's legislative analyst's office.

"Improvements on the state level will not be sufficient to solve all our fiscal problems, which won't go away any time soon," Williams told the 200 people gathered in Oxnard for the semiannual briefing.

Residential building in the state is at its highest level in 14 years, but Schniepp warned the number of new homes was insufficient to meet demand. The resulting housing crisis would ultimately limit job growth, he said.

And while Ventura County's unemployment rate, at 5.5% in July, continues to be lower than that of the state and nation, Schniepp said employer downsizing this year wiped out all local job gains made in 2001 and 2002.

But when businesses in the area resume hiring, there won't be enough housing for their employees, which will push median home prices further above $400,000 and lead to additional freeway congestion, he said.

While property appreciation should slow in the months ahead, Schniepp said home values in Ventura County would continue modest growth through the end of the year. That follows double-digit appreciation -- from 21% in Fillmore to 42% in Oxnard -- when the first half of this year is compared with the first six months of 2002.

But the economists continue to worry about the long-term effects of the state's budget crisis.

Sacramento lawmakers balanced the current budget mostly by borrowing against future revenue, using onetime federal funds and increasing vehicle license fees. Unless further spending cuts or substantial revenue increases occur, "that budget gap opens right back up" and the state will be at least $14 billion in the hole by this time next year, Williams said.

Schniepp offered several "fiscally conservative solutions for closing the budget gap," including:

* Reforming tax laws and regulations to make the state more business-friendly.

* Overhauling California's workers' compensation insurance system to bring down premiums.

* Making any tax increases temporary, while pushing for a long-term reduction in taxes.

* Creating a performance-based budget, under which state agencies justify expenditures based on performance goals.

* Considering the repeal of Proposition 98, which requires that about 40% of the budget be spent on education.

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